1. Field of the Invention
The present invention relates generally to incentive point programs. More particularly, the present invention relates to offline acquisition of incentive points and online registration/verification/redemption of these points.
2. Description of Related Art
Merchants have long realized that due to marketing costs, the first sale made to a customer is far more expensive (and thus less profitable) than ensuing sales. In order to maximize profits, most merchants work to build long-time relationships with customers, yielding ongoing sales with higher and higher profits. While many merchants would be willing to offer lower prices to entice particular customers to stick with them and not switch to competitors, this is often impractical and always expensive. Charging different customers different prices is difficult at many levels and even if it could be accomplished, giving the incremental profit back to the consumer defeats the merchant's goal in the first place. For this reason, incentive award programs were developed.
What is an incentive award program? Incentive award programs come in two varieties—loyalty incentives and permission marketing. Loyalty incentive programs award “purchase points” to those consumers who take certain purchasing actions. A classic loyalty incentive program provides a benefit to consumers who stick with or are loyal to a merchant and not switch to competitors, while “punishing” those who switch from brand to brand. Typically, an incentive is an incremental benefit that is worthless until enough points have been earned to redeem for a discount or a gift. Permission marketing programs reward consumers with “attention points” for paying attention to a marketing message.
The loyalty incentive program will be discussed first. A highly successful form of loyalty incentive award program with which many people are familiar is the airline mileage program, although non-mileage-based programs also are widespread. Mileage programs currently are conducted by almost every commercial airline. Travelers can earn mileage or mileage points by purchasing an airline ticket and actually taking the trip. The exact number of miles earned by the traveler is usually calculated by some formula based on the distance of the trip. After accumulating a certain number of miles or mileage points, the traveler can redeem his miles for a free or discounted airline ticket or some other award (e.g., coffee maker, free upgrades) that he can select from a catalog. The price-shopping, airline-switching fickle traveler would arguably not benefit (or not benefit sooner) than the traveler who is loyal to one airline.
Another incentive award program is the bottle caps collection. Typically, a soft drink merchant sells soft drink in a disposable package—glass bottle, plastic bottle, and cans. In the case of bottles, some soft drink merchants have sponsored promotional programs where some bottle cap may be worth some value. One bottle cap have an inscription saying, “You have won!” At this point, the lucky consumer would either take his bottle cap to the store where he purchased his soft drink or mail them to the designated redemption center to claim his prize.
Similar incentive award programs also have begun to flourish in an online environment over the Internet. Buyers can earn points online, for example, by purchasing goods from an online merchant, clicking on advertisements, filling out registrations and surveys, and performing various other activities of interest to merchants, advertisers and other companies. Users accumulate “points” into an “account” from which they can redeem their points for certain goods or services.
Even those consumers who are not regular online users or even familiar with the Internet may well be familiar with a variation of the point system. Many merchants award discounted or free merchandise to loyal and frequent customers. For example, by ordering a regular meal at a restaurant on ten different occasions (recorded on a stamped card), the customer may get 50% off the eleventh meal (or even get the eleventh meal free). Similarly, another merchant might give a loyal customer a free drink with his meal after every seventh or tenth visit. Another merchant might give $10 off the next purchase for a first-time customer. These variations on the loyalty incentive point system are just that—variations. Even though an actual physical card may be stamped after each visit to a restaurant or a gift certificate is handed out, these stamps and gift certificates are analogous to points, albeit in non-electronic form.
The tremendous power of loyalty incentives is this: the more points that a consumer has earned, the more the consumer wants points! Each incremental point is more and more valuable to the consumer because high point levels are associated with more exclusive (and valuable) benefits. So, the merchant benefits from the increased returns. The best customers are the least likely to switch to a competitor.
Yet, despite the attraction to consumers of points that often are perceived as a “free bonus” for taking actions they otherwise would have taken anyway (such as traveling on an airline or purchasing an item), existing point systems have certain redemption restrictions that have limited the desirability of points to consumers generally, and prevented them from continuing to participate in point systems on a frequent basis. After some degree of initial participation, consumers often are disillusioned after recognizing that they cannot obtain a sufficient number of points to reach their desired goal.
One factor contributing to this problem is that points are not universally redeemable for all goods. Points typically have restrictions on redemption, including limitations to the goods of one or a few affiliated merchants. Miles earned for trips taken on one airline, for example, cannot be applied to the traveler's account with another airline. Thus, in order for the traveler to earn as many redeemable miles as possible within a given timeframe, the traveler must buy and use airline tickets from one airline. By being loyal to one merchant, the consumer is rewarded with points which he can redeem later if he accumulates enough points. Similarly, the consumer with the winning bottle cap can only redeem the bottle cap with that particular soft drink merchant and only for a limited number (usually one) of prizes.
However, the consumer may be missing out on some bargains from other merchants because of his desire to remain loyal to the first merchant. For example, the consumer may continue to purchase relatively high-priced airline tickets from Jones Airlines so that he can accumulate miles from them instead of purchasing the relatively inexpensive airline tickets from Smith Airlines. Similarly, the consumer is likely to visit the expensive Joe's Tacos to get his card stamped after each visit so that he can get a free meal instead of visiting the less expensive Tim's Tacos. Thus, the merchant-specific nature of the incentive points system psychologically limits the consumer's desire to purchase goods that the consumer would otherwise purchase because of the perceived penalty (i.e., opportunity cost) of visiting another merchant.
From the merchant's point of view, loyalty incentives are costly. Every point that is redeemed by a customer costs the merchant money. While some attrition occurs (i.e., many points are never redeemed), the fact remains that every point awarded has a marginal cost to the merchant. For example, some airline companies sell “miles” to hotels and other points issuers for approximately 2 cents each. Thus, a very real cost to these merchants exists for every point issued to a customer. Because points cost money to issue, merchants always require some payment by the consumer to actually earn the points. For example, the consumer must purchase a plane ticket or stay in a hotel to get frequent flyer miles.
Despite these drawbacks in the loyalty incentive programs, consumers are seeing some improvements. Although most point systems are still merchant-specific, more and more merchants are forming relationships with one another so that points are more universally accepted across different merchants, and thus more desirable to consumers. For example, purchasing goods from one merchant can result in earning points with another merchant. A consumer's use of his credit card might earn the consumer miles with Jones Airlines. Similarly, points earned through one merchant may be redeemable with another designated merchant. Thus, the consumer is no longer restricted to one merchant's catalog at redemption time.
However, there still exists no “universal” marketplace for the redemption of points. At best, there may exist a redemption catalog containing the goods of multiple merchants.
Another redemption-related limitation of existing point systems is that points can only be redeemed after certain point thresholds have been reached. For example, Jones Airlines might award a free domestic round trip ticket only after the customer has earned 3,000 miles. A customer with 2,999 miles knows that these 2,999 miles is worthless until that last 1 mile has been earned to qualify for that 3,000 mile threshold. Similarly, only after the tenth visit to Joe's Tacos will the customer be eligible for a free meal. In each of these cases, if the customer has earned even one point, one mile, or one visit less than the required redemption threshold, the customer will not be able to redeem his points, miles, or visits for the desired goods or services.
Finally, points typically expire after a certain specified time period. The merchant benefits in that customers are motivated to redeem points as the expiration date approaches to avoid losing the points forever. Similarly, if the point total is below the redemption threshold, the customer may be motivated to take some action (e.g., purchasing a product, clicking on an ad, registering with a website) to earn enough points so that he may redeem them and not subject his already-earned points to expiration.
Yet, the “fixed-price” nature of redemption continues to limit the desirability of points to consumers, as well as the effectiveness of expiration. Over time, consumers may lose interest (and even let their points expire) as they recognize that the items they desire in the redemption catalog (which require a specified point total) may take a long time to obtain given the current rate at which points are being accumulated.
Were there an alternative form of redemption that provided consumers with a greater perceived opportunity to obtain desirable items, consumers might be more motivated to participate in incentive award programs with greater frequency. If consumers thought they could obtain their desired items, almost regardless of the number of points they had accumulated, they might be less disillusioned by the prospect of expiration of their points.
Thus, incentive award systems have demonstrated the viability of altering consumers' behavior if consumers perceive the points to be of value. Yet, the fixed-price nature of point redemption in existing incentive award systems often has limited the perceived value of points.
Another limitation with existing point systems is the rigid boundary that exists between online and offline purchasing channels. While a consumer that purchases some merchandise at an online web store can also earn incentive points for that purchase and redeem them at that online web store, he cannot redeem them offline at a traditional bricks-and-mortar store. Similarly, incentive points earned at a traditional bricks-and-mortar store can only be redeemed at that bricks-and-mortar store, but not any some other online web store.
The soft drink bottle cap is one example. The lucky consumer with the winning bottle cap from Joe's Cola Company can only redeem them in one of three ways, depending on the bottle cap program: (1) mail the winning bottle cap to Joe's Cola Company's redemption center; (2) call the appropriate telephone number of Joe's Cola Company's redemption center; or (3) take the winning bottle cap to the store where he purchased the soft drink where he can then claim his prize. In the past, this made sense. The consumer purchased his product offline at the store so he must also redeem (i.e., claim his prize) offline.
What is needed is a system, preferably an automated online system, that provides the benefits of incentive award programs (i.e., loyalty incentives), but without the disadvantages as noted above. Furthermore, the system should also provide flexible redemption capabilities across offline-online boundaries so that any points earned offline can be redeemed online, and similarly, any points earned online can be redeemed offline. The present invention provides such an enhanced account-based online system.